Tax Reform Panel Picks Apart FairTax Proposal

Tax Analyists ^ | 5/12/2005

[Your Nightmare]

Members of the President's Advisory Panel on Federal Tax Reform on May 11 expressed concerns over the FairTax national retail sales tax, a plan that has emerged as an alternative with a major grass-roots push.

Panel chair Connie Mack, vice chair John B. Breaux, and other members worried the plan would be difficult to enforce, would be regressive, and would require a high rate in order to take in enough money to fund the government.

Breaux raised concerns that the proposed 23 percent (tax-inclusive) rate would not be sufficient to raise the revenue necessary to fund the government. The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral. Further, Breaux said he thought exemptions that would be carved out to make the sales tax progressive would also complicate it.

Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.

Americans for Fair Taxation Executive Director Tom Wright emphasized that the plan emerged after "thorough academic research" and "thorough polling" The strong grass-roots push has resulted in some of the group's 600,000 members appearing at each of the panel's hearings and has inspired a large comment-writing campaign to the panel in support of the plan.

Sales tax advocates were among the 20 witnesses who gathered before the panel for a full day of testimony on tax reform proposals. Although the group has held several other hearings in Washington and around the country, the May 11 meeting was its first hearing on specific reform plans since Bush appointed the panel in January. The panel has been charged with identifying tax reform proposals that are progressive, encourage charitable giving and home purchases, and are revenue-neutral. The proposals are due by July 31.

Among the tax replacement and reform plans presented to the panel were the value added tax, consumption-based tax, and the flat tax, as well as proposals that would use the current income tax as the foundation.

Witnesses generally claimed that theirs was the fairest, simplest, most flexible, most transparent revenue-neutral proposal that would improve economic growth and savings while meeting the president's criteria of encouraging charitable giving and home buying. Witnesses presenting consumption-based plans praised their overhaul as taking millions of low-income taxpayers off the rolls, being easy to transition to on a worldwide basis, and including safeguards to prevent new loopholes that would result in increased complexity down the road.

Tax reform panel members, who agree the current tax system needs to be fixed, grilled witnesses without revealing whether they will ultimately endorse a consumption- or income-based tax or a different mixture of the two.

[Paul C. Jesup]

I am just pointing where the '23%' figure came from.

[numberonepal]

Members of the President's Advisory Panel on Federal Tax Reform on May 11 expressed concerns over the FairTax national retail sales tax

Yea, well I have concerns about the guvmint stealing my money right now.

[n-tres-ted]

I haven't seen much in the way of reports on the Tax Commission hearing featuring the Fair Tax witnesses. Too bad the small plane panic kept the hearing off CSPAN, at least so far as I could tell. Did John Linder appear as a witness?

[Principled]

I'm just pointing out for others -

[numberonepal]

Is the fairtax the only alternative?

No, but it is the only one that makes taxation voluntary, which is the only method that is truly "fair" and proper and intended by the Founders. People stealing my money, no matter who it is, is evil and wrong.

[EternalVigilance]

FairTax BUMP!

[ancient_geezer]

Fair Tax will penalize those on Social Security since they will not realize any income increase if the income tax is abolished because no withholding is taken on SS payments.

Interesting point that they already receive their gross income, and others don't. But your contention that they will not see an increase in their income is but not very accurate. For like every one else, Social Security recipients will receive the same Family Consumption Allowence rebating sales tax payments for purchases to the poverty level.

Since as a point of fact the purchasing power of Social Security payments will be maintained through the inclusion of the Fair Tax within the CPI along with all other sales taxes on the cost of goods and services. It must be noted that CPI is not adjusted for income or payroll taxes today, inspite of the fact that income and payroll taxes paid by corportations which provide the goods and services must pay those taxes out of their sales revenues.

Social Security will be assured cost of living adjustments sufficient to track any change in cost of living including those due to sales taxes, as it done today, at the same time will receive the FCA sales tax rebate as well.

I don't see Social Secuity recipient being penalized by income going down in any sense of the word, quite the contrary.

[EternalVigilance]

March 2, 2002

The Injustice of the Income Tax

by Alan Keyes

American Legion magazine

---

The income tax usurps privacy, allows the federal government to control income and paves a path to tyranny.



Few issues provide such an enduring occasion for political debate as the question of how to fund the federal government - the question of taxes. In recent years, we have approached national agreement that the current system is deeply and perhaps fatally flawed. Accordingly, politicians have presented various versions of what they call "fundamental reform".

But much of the talk of fundamental reform is really an effort to tinker with the existing tax system in order to help diffuse growing public discomfort and even outrage. Few political leaders are willing to consider the most necessary change because it would involve removing politicians from the gatekeeper role over income and resources of all Americans.

Real reform requires abolishing the income tax and returning to the system our founders intended. This means funding the federal government with tariffs, duties and excise taxes or sales taxes, not with the privacy destroying income tax. We should return to our nation's original tax.

Government controls decisions: Our founders frequently quoted a principle from William Blackstone's Commentaries on the laws of England. " A power over a man's resources is a power over his will." To control the resource base of a decision maker is to control his decisions. But the ultimate decision-maker in American life and politics must be the people. And the people cannot be free without a resource base of material comfort and sustenance free from government domination or control.

A tax system putting government in control of the people's income tends irresistibly to put government in control of political decisions as well. The founders sought to avoid this path to tyranny, so they declared a direct tax on the income of individuals unconstitutional.

The reversal of that wisdom came during the "progressive" era at the beginning of the 20th century. A mentality of class warfare prevailed at the time; a first flush of socialism in American life, and the income tax movement was one of its results. Setting farmers against industrialists, urban folk against rural, poor against rich, everyone was led to expect than an income tax would hit the other group harder. Chiefly, of course, the argument was that the rich would pay a disproportionate share. What they didn't tell us was that in this socialist scheme, everyone with a private dollar is suspected of being too rich.

We ought to have realized that the income tax is utterly incompatible with liberty. It is actually a form of slavery. A slave is someone the fruit of whose labor is controlled by somebody else. A slave is not somebody with nothing. Rather, he has only what the master lets him have.

Under the income tax, the government takes whatever percentage of the earner's income it wants. The income tax, therefore, represents our national surrender to the government of control over all the money we earn. There are, in principle, no restrictions to the pre-emptive claim the government has upon our income.

No American government has seriously pressed this claim on our income to its logical conclusion - the explicit demand that all income be handed over to the government and any private expenditures made subject to government approval. But we are deeply unwise to underestimate the power of the confiscatory principle in the hands of a government determined to pursue its advantage. The federal government could bankrupt the country in short order, merely by deciding to insist more aggressively than it already does on collecting the money we have already agreed it has the right to take. We must insist on the erection of constitutional protection, beyond the reach of any congress or president to override, of the fact that American citizens own the dollars they earn. Without such protection, we hold these dollars merely subject to the government's revocable permission.

The withholding tax system disguises this dangerous loss of control. One of the effects of withholding is that we don't even realize that government money is actually our money. Most of us think that only our net pay - our actual paycheck - is our money, and what is withheld is the government's money. We tend to think this because the government simply grabs part of the money we have earned.

I once heard a caller to a talk radio show object to the proposal that taxpayers cover the savings and loan debacle, demanding instead that the government pay for it, as though the government could pay for anything without using dollars taken from us.

Surrender of Privacy. The income tax threatens our liberty in many ways, but surely the most alarming and outrageous is its requirement that we surrender our privacy by exposing all the sources of our income to the government. One of the prudent protections of liberty is to treat the government, which today seems to be your friend, as if tomorrow it could become your enemy. No army exposes all lines of supply and all resources even to its allies, much less to its potential enemies.

While our government is not our enemy in the traditional sense, our founders were ever mindful that liberty depends upon vigilance against the temptations of tyranny. That's why, if we mean to retain our freedom, it is our duty to maintain material resources for action that the government cannot control and manipulate. But with the income tax, we surrender the ability to maintain economic associations without the knowledge of the government.

It even gets worse. Through government social engineering, such as bestowing a revocable "501-C3" non-profit status on churches, the government is able to manipulate the tax system in order to gain control over our institutions of conscience, character and moral formation. The American Revolution itself would never have happened without the courage of such institutions, particularly churches. The same is true of the abolition of slavery and of all other great movements of conscience in American history. These efforts were decisively motivated by principled private associations, the role once played by these institutions in boldly challenging us to oppose inroads against our liberty has been gutted. As a result of the income tax, we have subjected the entire sector of conscience to the control and manipulation of the government. As a result we have muffled what ought to be the voice of independent faith and conscientious action in our society.

National Sales Tax. We don't need to improve the income tax. We need to get rid of it! Our founding fathers had a simple and clear vision of a citizenry with control over the money it worked to earn and with the corresponding ability and independent judgment to exercise its rightful authority over government.

Whether to save money or spend it was intended to be a matter of the sovereign liberty of citizens, who would decide what to do with every dollar. Under a national sales tax, this is exactly what would happen. Only after we decide what to do with our money can the portion used for purchases in the open marketplace be subject to tax. The sales tax requires no surrender of privacy, no confession to the government of our entire economic life.

Furthermore, a sales tax would make it much harder to avoid paying legitimate federal tax without good reason. Those in criminal enterprises who have never filed a federal tax return would have to pay the national sales tax charged by the merchants who provide his goods and services. When such a person enters the marketplace to make a purchase, he would pay the tax that everyone else is paying. The sales tax is a more equitable system, because the incidence of taxation is more evenly distributed throughout the population.

But under a national sales tax system, equity would not come at the price of giving up control of our money. Rather, a national sales tax would restore to American working people their control over the incidence of taxation. Only the relatively well-off have that opportunity under the present system because they can hire lawyers and accountants to calculate the most advantageous tax strategies and exploit arbitrary technicalities.

The most important goal of tax policy must be reclaiming control over taxation, on which dollars and how much of our income the tax actually falls. Today, taxation is entirely outside of the control of most working Americans because it is determined by politicians and bureaucrats and manipulated by clever lawyers and accountants. The liberating power of a national sales tax system is that it would end their control. Under a sales tax system, individual citizens would again be sovereign in deciding how much of their money will be subject to the tax at any given moment, according to their particular financial circumstances. Such a system will give us back control over our money that we have not had in generations -not since the income tax was imposed.

And that control will be financially crucial to families. When times are tight, instead of praying for politicians to pass a beneficent tax cut, Americans will have the power to give themselves tax cuts just by changing their spending and saving patterns. We already reduce our discretionary expenditures when money becomes tight, and under a sales tax system our tax burden would also become a discretionary expenditure.

Congress will pass a national sales tax only when the people insist on it. To bring this day closer, it will be necessary to turn the attention of grassroots America to the real tax debate. That debate is not only about the rate of taxation and the bloated size of government. It also is about the right to property and the preservation of our liberty. Americans must come to see that the tax reform we so urgently need is not more back room manipulation of the income tax and its ever mutatable rates, schedules and regulations but rather its total replacement with the system our founders intended.

We must remind our fellow citizens that the income tax is less than 100 years old, and that the nation did fine for a long time without it. A national sales tax is not a radical new proposal but is actually a return to the sensible and consistent understanding of liberty that the founders of America established. Returning to a sales tax is sound conservative thinking, which restores the system of taxation that stood the test of time in its proven compatibility with liberties of our people. The republic survived difficult trials in its early years in part because we had a tax system that left the citizenry independent enough to successfully discipline its government.

America was built by people who, rightly and nobly, used the control over their actions and resources that a wise political order secured for them. The income tax expropriates the independence that made possible American prosperity, American character and ultimately American self-government. By keeping the income tax, we are inexorably encouraging moral poverty - the poverty of motivation, of discipline and of responsibility - that we all sense has deepened in the America of recent decades.

By wisely turning back to the wisdom of our founders, we can renew an economic environment of wholesome motivation in which responsibility pays and in which discipline makes a difference. Real tax reform can help us make an historic break with the service and passive habits of recent years and begin a new era of confident liberty. If we still believe we deserve - and have the capacity - to be free, ending the income tax is a duty to ourselves and our posterity.

Alan Keyes, a former Republican presidential candidate, was the 1967 American Legion Boys Nation president and National Oratorical Contest winner.

[Bigun]

"That's 10 "responses" by 3 individuals out of 23 posts and over 200 page views."

That is mostly due to the fact most people on FR have grown tired of the circular arguments presented by yourself and YN on these threads. In short your reputations preceed you.

[ancient_geezer]

I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accepts it.

Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power.

Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them.

Alan Keyes 1999

 

"As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government."

. . .

"The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system."

"In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation."

- KEYES TRANSCRIPT (01/28/02)

 

The condition upon which God hath given liberty to man is eternal vigilance; which condition if he break, servitude is at once the consequence of his crime and the punishment of his guilt."
-John Philpot Curran: Speech upon the Right of Election, 1790.

[groanup]

Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.

Because it's a good idea for citizens and a bad idea for politcians, that's why. DUH!

[groanup]

The fairtax crowd silence is deafening on this thread.

Well excuse me, I've been having lunch. Funny how you hear silence before four posts have been made.

[Conservative Goddess]

Correct. TaxAnalysts provides resources to the 'industry.' Their bias should be obvious to all but those who are so blind that they refuse to see.

[lewislynn]

Funny how you hear silence before four posts have been made.

My post was one hour after the article was posted yesterday...tax threads don't usually go a full hour before the first few posts.

Well excuse me, I've been having lunch.

I should have known the fairtax crowd had to get to work before they could have access to computers on their bosses time.

[rolling_stone]

Mack, who raised concerns similar to his fellow panelists', said he was "intrigued" by the plan. "But if it's such a great idea, why haven't other political entities around the world pursued it?" he asked.

Simple, politicians everywhere want to hide how much they are stealing from us to buy votes for them....and just because it isn't used elsewhere is a p#ss poor excuse for not analyzing it. Imagine the world being flat until Christopher Columbus came along and changed all that..and made it round....LOL Politicians are brain dead when it comes to giving excuses to keep their sacred cow. Why change the system where over 50% of lobbyist money is spent for tax influence...It's not like they care about the people or anything, just themselves.

[kevkrom]

tax threads don't usually go a full hour before the first few posts

Unless they're posted near midnight, when most FReepers are asleep, of course.

[groanup]

I should have known the fairtax crowd had to get to work before they could have access to computers on their bosses time.

Typical. It's a shame you have to resort to such juvenile attacks. You are to be pitied. How can anyone take you seriously? BTW, I am my own boss and I have 5 computers at home but only 4 at the office.

[houeto]

Breaux raised concerns that the proposed 23 percent (tax-inclusive) rate would not be sufficient to raise the revenue necessary to fund the government. The Joint Committee on Taxation estimated that it would take as much as a 57 percent (tax-exclusive) rate to be revenue-neutral.

Basically an eye-opener showing us just how bad we're taking it in the shorts through seen and 'unseen' taxes!

Thanks for the ping geezer.

[Conservative Goddess]

Of course they have 'concerns' about the FairTax......

It would remove much, if not all, of their power to parlay favors for cash, perks, off the books stuff.

I'm shocked, shocked I tell you to learn that they have 'issues' with this proposal.

[Your Nightmare]

Correct. TaxAnalysts provides resources to the 'industry.' Their bias should be obvious to all but those who are so blind that they refuse to see.

Any specifics of this report you want to point out as being biased? It seems a pretty accurate report of the hearing. MarketWatch stated "backers of a national sales tax received a lukewarm reception from the advisory panel."